Waxman Wants Executive Pay Data from Banks Receiving Bailout Funds

by Deb Cupples |   About two weeks ago, the New York Times and AP reported that banks slated to receive billions of tax dollars under the $700 billion bailout plan were planning to use the funds to give raises or bonuses to executives and employees -- instead of using the funds to unfreeze credit markets by making loans to people and businesses.

Such spending choices may be lawful, because government officials failed to legally require banks receiving bailout funds to spend the funds in certain ways (i.e., in ways that would actually help our nation's economy). 

House Oversight Committee Henry Waxman is understandably concerned, as evinced by a letter he sent a couple weeks ago to the CEO of Citicorp.  The first three paragraphs are below:

"Earlier this month, the Treasury Department announced plans to invest $125 billion of taxpayer funds in nine major banks, including yours, as an emergency measure to rebuild depleted capital. According to recent public filings, these nine banks have spent or reserved $108 billion for employee compensation and bonuses in the first nine months of 2008, nearly the same amount as last year!

"Some experts have suggested t hat a significant percentage of this compensation could come in year-end bonuses and that the size of the bonuses will be significantly enhanced as a result of the infusion of taxpayer funds. According to one analyst, 'Had it not been for the government's help in refinancing their debt they may not have had the cash to pay bonuses.'

"Press accounts report that the size of the bonuses could exceed $6 billion at some firms receiving federal assistance."  (Waxman letter to Citicorp, footnotes omitted)

It gets better: Rep. Waxman sent similar letters to eight other financial institutions: Bank of America, Bank of New York Mellon, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley, State Street Corporation, Wells Fargo.  Links to each of those letters are on this page.

Basically, Rep. Waxman wants to know how much money the human beings who make those companies' decisions have devoted to executive pay from 2006-08.  The paragraphs introducing Rep. Waxman's data request give a pretty good idea of what  he thinks of this mess:

"While I understand the need to pay the salaries o f employees, I question the appropriateness of depleting the capital that taxpayers just injected into the banks through the payment of billions of dollars in bonuses, especially after one of the financial industry' s worst years on record.

"As one newspaper recently reported, 'critics of investment banks have questioned why firms continue to siphon off  billions of dollars of bank earnings into bonus pools rather than using the funds to shore up the capital position o f the crisis-stricken institutions.'

"To assist the Committee' s investigation into this issue, I request that you provide the
following information and documents for your company as well as any affiliates or subsidiaries:

1. For each year from 2006 to 2008, the total compensation and average compensation per employee, paid or projected to be paid to all personnel, broken down by salaries, bonuses (cash and equity), and benefits; and a description o f the reasons for the year-to-year changes in these amounts.

2. For each year from 2006 to 2008, the number of employees who were paid, or are
projected to be paid, more than $500,000 in total compensation; the total compensation paid or projected to be paid to these employees, broken down by salaries, bonuses (cash and equity), and benefits; and a description o f the reasons for the year-to-year changes in these amounts.

3. For each year from 2006 to 2008, the total compensation paid or projected to be paid to the ten highest paid employees, broken down by salaries, bonuses (cash and equity), and benefits; and a description o f the reasons for the year-to-year changes in these amounts.

4. Documents sufficient to show all policies governing the granting of the bonuses to the groups of employees referenced in items (1) to (3). " (Waxman Letter to Citicorp, footnotes omitted)

I cannot wait to see how (or if) those companies' CEOs comply with Rep. Waxman's requests.  And I'm glad that someone is asking the right questions, given that most of our congressmen didn't seem to care about the risk of funds mis-use when drafting the legislation sans spending restrictions.

Every dollar that goes into an executive's personal bank account is one less dollar available to improve the company or to save jobs.

Other Buck Naked Politics Posts:

* Are Bailout Funds Being Misused?

* Cutting Executive Pay Would Save Jobs

* Lehman Execs Redistribute Shareholder Wealth (to Themselves)

* AIG Execs Redistribute Shareholder Wealth (to Themselves)

* Execs Made Millions While Driving Companies into Ditch

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Comments

[Batocchio]

How shocking, that companies unethically would continue to act unethically! I'm sure if Paulson gives them more money without restrictions, they'll come to their senses.

[Batocchio]

Err, "companies that behaved"...

[Oh Noes!]

A sternly worded letter! I thought Waxman ran out of sternly worded letters after all the letters sent to Rove were ignored.

[Deb Cupples (Buck Naked Politics)]

Batoochio,

Apparently, our Congressmen think that giving them more string-free cash is just the ticket.